Sept. 7 (Bloomberg) -- Bank of America Corp.’s most richly
compensated executive, Thomas K. Montag, may become a future
candidate for the top job after a shakeup elevated him to co-chief operating officer at the money-losing lender.

Chief Executive Officer Brian T. Moynihan is counting on a
new lineup to reverse the bank’s fortunes after he posted a
record $8.8 billion quarterly loss, spent $30 billion to clean
up faulty mortgages and sold $35 billion of assets and preferred
shares to rebuild capital. The stock has lost more than half its
value since Moynihan became CEO of the Charlotte, North
Carolina-based company in January 2010.

“Moynihan knows he’s in the line of fire, he’ll do
everything he can to save the bank,” said Greg Donaldson,
chairman of Evansville, Indiana-based Donaldson Capital
Management LLC, which oversees $500 million including Bank of
America shares. “If for some reason he’s gunned down, he knows
he has to have an heir apparent. Montag is a winner, a guy
bringing dollars to the bottom line, and it would be hard for
the board to throw him out, should the time come.”

The revamped team pairs Montag, 54, the head of global
banking and markets, with David Darnell, 58, the co-COO who will
supervise retail banking. It won’t include Sallie Krawcheck, who
ran wealth management, and Joe Price, who led the retail unit.
Both will leave the company, the bank said in a statement
yesterday. Thousands of lower-level employees also may be fired
in a cost-cutting plan that Moynihan has dubbed Project New BAC.

‘Tuesday Massacre’

“Tuesday-afternoon massacre is what I’d call it,” said
Nancy Bush, an analyst and contributing editor at SNL Financial,
the bank-research firm in Charlottesville, Virginia. “Brian is
under pressure, the company is under pressure, and when you’re
transmitting your message to so many different people, I think
it’s harder to get results. And clearly he was not getting
results as quickly as he would have liked.”

Bank of America rose 49 cents, or 7 percent, to $7.48 at
4:15 p.m. in New York Stock Exchange composite trading.

Montag, a former trading head at Goldman Sachs Group Inc.,
gains responsibility for commercial banking previously handled
by Darnell. Wealth-management operations overseen by Krawcheck,
which included the Merrill Lynch brokerage, now will be run by
Darnell, who also takes over Price’s former retail-banking
units. Collectively, the two executives will preside over a
company with $2.26 trillion in assets, $1.04 trillion in
deposits and about 288,000 full-time employees.

Montag’s Contribution

Global banking and markets, led by Montag, posted net
income of about $10 billion in the 18 months ended June 30, the
six quarters since Moynihan became CEO. Darnell’s global
commercial banking reported a profit of $5.5 billion in the
period. That compares with about $2.4 billion at Krawcheck’s
global wealth and investment management and $2.1 billion at the
deposits segment overseen by Price. The card business, also run
by Price, was unprofitable as the company booked writedowns last
year after new regulations curbed fees.

The main businesses to be managed by Montag contributed
$20.1 billion in first-half revenue this year, or about 50
percent of the company’s total.

“Before this, they clearly seemed to be operating without
a succession plan for the CEO; at least now it looks like
they’ve got one in place,” Moshe Orenbuch, an analyst at Credit
Suisse Group AG, said today on Bloomberg Television’s
“InsideTrack” with Deirdre Bolton and Erik Schatzker. Montag
has broader experience than Darnell and is the top contender to
be the next CEO, Orenbuch said.

Looking Ahead

Moynihan, Montag and Darnell “look forward to many years
of work together,” Larry DiRita, a bank spokesman, said in an
e-mail. “This decision brings forward a new generation of
talent that includes many potential future leaders of our
company.”

Montag received $15.2 million in bonuses for his
performance last year, when his division was the company’s most
profitable operation with $6.3 billion in earnings. Analysts
have credited Montag’s business with bolstering results at Bank
of America, which has posted deficits in six of its last 11
quarters as it struggled to recover from the 2008 financial
crisis and losses tied to faulty home loans and mortgage bonds
created by Countrywide Financial Corp.

Darnell joined a predecessor to Bank of America more than
three decades ago as a credit analyst in Greensboro, North
Carolina. He led the bank’s middle-market unit for four years
before starting as president of commercial banking in July 2005.
His new responsibilities include operations that provide
deposit, card, home mortgage, wealth management, trust banking
and related services, according to the bank.

Merrill’s Match

Darnell, who will now oversee more than 16,000 financial
advisers, said in a January interview that the Merrill Lynch
brokerage was a “perfect match” for Bank of America because
its members sent thousands of referrals to the commercial-banking unit.

Montag was at Goldman Sachs when the New York-based firm
was selling mortgage-linked securities to investors. His role
brought him notoriety later in April 2010 when U.S. Senator Carl
Levin, a Michigan Democrat who led a panel investigating the
financial crisis, cited a June 2007 e-mail from Montag that used
an expletive to describe the low quality of the securities.

Bank of America gave Montag $29.3 million in stock awards
in 2009, which included $20 million of stock as part of a
package set in May 2008 when he was hired by then-Merrill Lynch
CEO John Thain. Bank of America later agreed to acquire Merrill
during the credit crisis as regulators were trying to stave off
the collapse of the nation’s biggest financial firms.

Krawcheck Exits

The combined company eventually had to accept $45 billion
in direct U.S. investments and draw on other federal programs to
bolster its finances. While Moynihan vowed that Bank of America
would never need such help again, the bank has been the biggest
decliner this year in the 24-company KBW Bank Index, dragged
down by expenses and writedowns tied to faulty mortgages that
could reach $66 billion, according to FBR Capital Markets & Co.

After sliding 48 percent this year through yesterday, the
stock was trading for about a third of its book value. Moynihan
has had to contend with speculation he’d need to bolster capital
by issuing more stock. He fended that off by selling assets and
agreeing last month to let Berkshire Hathaway Inc. invest $5
billion in preferred shares and warrants. Berkshire Chairman
Warren Buffett called the bank a “strong, well-led company.”

Until yesterday, those leaders included Krawcheck, 46. She
ran New York-based Citigroup Inc.’s wealth-management unit
before joining Bank of America in August 2009, supervising more
than 15,000 financial advisers at Merrill Lynch and 2,200 at
U.S. Trust and pushing client balances to $2.2 trillion by June
30. Second-quarter profit this year advanced 54 percent.

Moynihan’s Style

Krawcheck told investors in March that the bank’s style was
different from other firms because “Brian is really driving a
culture where we don’t care whose P&L these things go into.
There are not debates about, ‘I want this percent of revenue,
and you need that percent of revenue, and we need X, Y, Z.’ It
really is about driving for the client.”

Her departure puts in question Krawcheck’s status as a new
board member at the Financial Industry Regulatory Authority.
Krawcheck was elected last month to the 22-member board of
governors for the brokerage industry’s self-regulator, in the
large-broker category. Unless she gets a job at a big firm, her
regulatory position eventually will be vacated and filled by
special election, said Howard Schloss, a Finra spokesman.

Top and Bottom

Price, 50, served as the bank’s chief financial officer
until early last year, when Moynihan took over and named him to
head consumer banking. That put Price in charge of more than
5,000 branches.

“It became evident that streamlining could be done at the
top as well as throughout the organization,” Price said in Bank
of America’s statement yesterday.

Darnell and Montag have decided which executives will
report directly to them, joining an operating committee that
will meet with Moynihan monthly, the CEO told employees in a
memo yesterday.

The changes are “a big step forward in the transformation
of our company, a journey that we began together in January of
2010,” according to excerpts from the memo obtained by
Bloomberg News. “This change also is the first major, direct
result of our New BAC initiative.”

Moynihan said in April that Bruce Thompson was replacing
Charles Noski as chief financial officer, and Gary Lynch,
formerly a U.S. Securities and Exchange Commission enforcement
director, was hired to oversee legal and compliance operations.
The CEO announced in July that Terry Laughlin would succeed
Thompson as chief risk officer.

Buying Time

The management changes will give Moynihan more time and
breathing room to improve results, said Richard Bove, an analyst
with Rochdale Securities LLC in Lutz, Florida, in a Bloomberg
Television interview today. Moynihan can focus on “policy
decisions, policy implementation,” Bove said. “Back in the
day, the CEO was never involved in the day-to-day operations.”

Bank of America was among 17 banks sued last week by the
U.S. to recoup $196 billion spent on mortgage-backed securities
bought by government-run Fannie Mae and Freddie Mac. The Federal
Housing Finance Agency said in filings that Fannie Mae and
Freddie Mac bought $6 billion in mortgage-backed securities from
Bank of America; $24.8 billion from Merrill Lynch, and $26.6
billion from Countrywide.

Selling Stakes

Bank of America has said losses on the bonds were due to
the housing-market slump, while the FHFA accused financial firms
of misleading Fannie Mae and Freddie Mac about the soundness of
mortgages.

Moynihan struck deals to cut stakes in BlackRock Inc. and
China Construction Bank Corp. and divest insurance units and
non-U.S. credit-card businesses as he scales back the company
left to him early last year by predecessor Kenneth D. Lewis.

“Only by streamlining and focusing our resources behind
our customers will we truly deliver on the promise of what we
have built,” Moynihan said.

While cost cuts help, they won’t allay investor concerns
about the bank’s home lending, according to a research note by
William Tanona, an analyst at UBS AG who has a neutral rating on
Bank of America.

“Capital concerns and significant mortgage-related
liabilities will continue to weigh on the stock until greater
progress is made on resolving these challenges,” he wrote.